Let me just make it clear up front that I think the whole "peace process" is a crock, and, even more, hope it fails miserably- precisely because I believe that its failure is a necessary step toward achieving true peace, the most important thing.
That said, you have to savor the irony of Obama, the man who supposedly understood the world so well he'd save not only the US' international reputation but the world itself, really putting his foot into it, on both sides, and thus perhaps (hopefully?) ruining the very process he claimed only he could save.
On the Palestinian side: I think a serious case can be made that the Arabs are ever more emboldened by the fact that it seems that the current US administration will see no wrong in them, thus leading to their attempted unilateral moves that may well (again, hopefully) lead to Israel taking some steps of its own.
On the Israeli side: Let's not be stuck on stupid: I think it's pretty obvious that when the US says it doesn't want building in a place, it means it hopes that place will one day be Judenrein. Leaving aside that there are hundreds of thousands of Jews in the West Bank and tens of thousands in the Golan Heights (and considering what a bang-up job has been done on- whoops, for- the few thousand Gaza expelees), when Obama's representative starts talking about Gilo in the same language, Israelis are gonna put two and two together and start drawing the line, and at a lot more than Gilo and Jerusalem.
So much for The One stopping the rise of the oceans.